The Home Equity Theft Reporter

Welcome to The Home Equity Theft Reporter, a blog dedicated to informing the consumer public and the legal profession about Home Equity Theft issues. This blog will consist of information describing the various forms of Home Equity Theft and links to news reports & other informational sources from throughout the country about the victims of Home Equity Theft and what government authorities and others are doing about it.

Saturday, March 31, 2012

Foreclosure is a nightmare in itself and now a Parma woman says Wells Fargo closed up her house and cleaned her out illegally. "It was my first home, it was my children's first home that we owned," says Elizabeth Kennedy. It was her American dream: A home on a quiet street in Parma.

But the nightmare of the recession hit her family hard. "About a year ago, year and a half ago, my husband lost his job. It was supposed to be a month long thing, it ended up being almost a year," she explained.

Despite attempts to get the house back, Kennedy's home went into foreclosure and sold back to the bank at auction. Then going through divorce, this legally blind mother of two relied on friends to slowly move her possessions out of her home.

One day -- she says without warning -- the locks had been changed with some of her stuff still inside. She still had boxes of baby pictures, sentimental family memories, TVs, furniture and four brand new dirt bikes.

After two weeks of trying to go through Wells Fargo, she finally broke in to find all of her stuff gone. "I don't even think there was a dust bunny in the corner. There was nothing, just completely empty," Kennedy said.

She hired attorney Ed Heben after she learned from the Cuyahoga County Sheriff's Department that the mortgage lender never requested a "writ of possession" and that the house was still legally her property.

Heben filed a lawsuit Wednesday against Wells Fargo/U.S. Bank. "They've been sued for trespassing, changing the locks on a property, conversion -- which is theft and stealing of the personal property," says Heben.

Kennedy says the company that claims to have hauled everything away says they dumped it in Sparta, Ohio. Wells Fargo says it does not have the lawsuit in-hand and said it would look into her case.(1)

(1) For those homeowners who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see:

Two Las Vegas companies advertising foreclosure services have been ordered to cease operating and fined $50,000. The state Division of Mortgage Lending claims Majestic Group LLC and Nevada Sky Premier LLC were not licensed to operate as covered service providers and bilked at least two unidentified clients. Jose Benjamin Rodriguez, listed as the head of the companies, has 20 days to contest the order by Commissioner James Westrin. The companies could not be reached for comment. One of their listed telephone numbers has been disconnected and no one answers the other.

Majestic, 2300 W. Sahara Ave., advertised that it would help homeowners pay overdue mortgages, boasting "We are your last resort." One homeowner signed a contract with Majestic in March 2011 and made an upfront payment of $3,623. The homeowner then made $800 monthly payments for six months. Rodriquez told the homeowner the monthly payments would be forwarded to the mortgage service.

A second homeowner signed a contract with Majestic in November 2010 and paid an upfront $3,498. The homeowner made $800 payments to Majestic for 10 months. The owner was then directed to send the payments to Nevada Sky and he did for six months.

The complaint says the companies did not have a state license and that payments made by the second homeowner were never sent to the mortgage servicer. The home was foreclosed on.

The state order directs Rodriquez and the companies to return $8,423 to the first homeowner and $16,298 to the second. The restitution must be made within 30 days. Westrin also imposed a $50,000 fine on Rodriquez and the companies.

Banksters Accused Of Loophole Abuse In NY Law Calling For Foreclosure Settlement Conferences; Results In Judicial Logjams, Homeowners Left In Limbo

The New York Law Journal reports:

Advocates of homeowners facing foreclosure are pushing for a change in court rules to remove an obstacle that has put many homeowners in a judicial limbo, unable to participate in settlement conferences to make their debt more manageable.

In particular, the advocates have proposed moving up the point at which attorneys for lenders must submit an affirmation attesting to the accuracy of court documents.

"If the whole point of the [affirmation] rule is to prevent plaintiff lawyers from knowingly filing false or inaccurate filings in foreclosure cases, make it a rule that the affirmation be filed when they file the complaint, and not wait until they file the request for judicial intervention," said Jacob Inwald, director of foreclosure prevention litigation for Legal Services NYC.

Under current procedure, lenders can file a summons and complaint for a foreclosure action without triggering a mandatory settlement conference. A conference is scheduled only after proof that the summons has been served, a specialized request for judicial intervention and the attorney's affirmation are submitted.

Since the implementation of the affirmation requirement in October 2010, advocates charge that lenders have delayed filing the request for judicial intervention so that they do not have to file the affirmation right away. That has created a "shadow docket" of cases that do not show up in official court statistics or trigger a settlement conference.

***

[Co-director of the Neighborhood Economic Development Advocacy Project Josh] Zinner said he and fellow advocates are "very supportive" of the affirmation, noting that the purported shadow docket was "not the fault of the [attorney affirmation] rule itself." Instead, he argued, "lenders are not following the spirit of the rule by taking advantage of a loophole, filing cases and holding off on filing the affirmation."

A Realtor who was exposed in a 9Wants to Know investigation has had his license suspended for six months and must pay a $5,550 fine. 9Wants to Know showed in 2011, that Mark Dyson didn't bring an offer to a seller he represented, and then turned around and bought the building at a foreclosure auction himself.

The Colorado Real Estate Commission and Dyson reached the agreement which also requires him to be supervised by a broker for two additional years after his suspension, if he chooses to practice real estate in Colorado. The commission will have to approve the supervising broker, according to the final agency order issued Mar. 19.

In February 2011, 9Wants to Know discovered Dyson didn't tell Carol Price about an offer to buy her property, and then when the property went to foreclosure, Dyson bought it and sold it to a buyer who had made two previous offers. State law requires a seller's agent to present all offers.

"I should have presented the offer, that was my mistake," Dyson told 9Wants to Know previously. "My mistake." State law does not restrict real estate agents from buying a property they list at the foreclosure auction.

Dyson did not comment on the suspension when reached by phone Monday morning. His attorney, Jon Goodman, released the following statement to 9Wants to Know: "Once Mark had a chance to kick around his side of the story, in detail, with neutral and sophisticated decision makers, we worked out a six month suspension rather than a permanent revocation. Mark respects the ultimate decision reached by the State."

The Colorado Real Estate commission voted to revoke Dyson's license during a meeting in April 2011. Dyson appealed that decision and reached an agreement with the Colorado Real Estate Commission this month.

The pool guy, plumber and lawn man for a Palm Beach Gardens homeowner who recently won an $18 million settlement in a foreclosure-related lawsuit are being sought for questioning by the bank still seeking to repossess her home.

Lynn Szymoniak, a 63-year-old attorney who specializes in white collar crime, shot to national fame last year when she was featured on the CBS news show 60 minutes for her role in uncovering widespread mortgage and foreclosure fraud after finding it in her own 2008 case.

This month, it was announced she would receive $18 million from a whistle-blower lawsuit filed under the federal False Claims Act, which allows the government to bring civil actions against entities that knowingly use or cause the use of false documents to obtain money from the government.

Deutsche Bank, which filed to foreclose on $759,428 in unpaid principal against Szymoniak in 2008, sent notice to her attorney Monday that it plans to depose eight companies that have done work on her home including her plumber, air conditioning repair firm, landscaper and two pool service companies.

Szymoniak said because her loan was taken out to renovate her home, including installing hardwood floors and upgrading bathrooms, the bank may be trying to determine whether she actually used the money for the designated purpose.

But she said the move is unusual in a foreclosure case, and because the requests are so lengthy, including a demand for all communications between the company and herself, she said it’s more likely a form of harassment or an effort to increase court costs.

“It’s just them saying ‘How can we dirty her up as best we can,’” Szymoniak said. “It would almost be funny to see my yard guy come in. The one guy didn’t even start servicing my pool until four months ago.”

A representative from American Home Mortgage Servicing, Inc., which services Szymoniak’s loan, said she was looking into the reason beind the subpoena and would respond to the Palm Beach Post’s request for comment by the end of the day.

Last year, shortly after appearing on 60 Minutes, Deutsche Bank’s case was thrown out of court after it was ruled it couldn’t prove ownership of the mortgage. It re-filed the foreclosure in May, but also included Szymoniak’s son, Mark Cullen, in the case. Cullen, who was not on the mortgage, was a graduate student living in New York at the time.

“Now, every time my son fills out a loan application he has to say he was sued for foreclosure,” Szymoniak said, noting that Deutsche eventually dropped Cullen from the suit.

Szymoniak won’t receive the $18 million settlement for at least two months and plans to pay off the mortgage as well as donate to several charities. “Until I can pay this mortgage off, Deutsche Bank will just continue to run up fees and try to harass the living hell out of me,” she said.

Cook County Continues Search For Ex-Homeowners Who Left Behind $16M In Surplus Sale Proceeds From Foreclosure Auctions

In Chicago, Illinois, NBC Chicago Channel 5 reports:

A pot of money held in limbo at the Cook County Clerk of the Circuit Court could help ease the pain of some homeowners affected by the housing bust. The money in question -- about $16 million -- are surplus funds, created after a homeowner was foreclosed upon and their home re-sold. If the foreclosed homeowner owed less on the mortgage than the final sale price of the subsequent sale, those funds go back to the first owner.

"We have an individual that’s due 13 cents. We have someone that’s due $400,000 dollars," said Dorothy Brown, the clerk of the court.

Illinois law requires these surpluses to be deposited to the clerk of the court, where it then continues to sit, collecting interest until the original homeowner claims it.

The problem? Finding those people. Many don’t realize the funds are due them, and many who’ve been through foreclosure don’t often leave a forwarding address.

"It’s hard to find them because many times when people lose their properties to mortgage foreclosure they have also have a lot of credit card debt and a lot other kinds of debts, and they’re probably actually running from those creditors," said Brown. "As a result when they leave their property, they don’t leave a forwarding address."

In an attempt to shorten a lengthy list of names and a piggy bank of surplus money, Brown's office has created a searchable section on its website to help locate the funds' owners. Those who think they may have money in the fund can visit www.CookCountyClerkofCourt.org and enter their last name, first initial, and phone number. "I just felt it was something we should do for the people," said Brown.

For those experiencing the foreclosure process right now, the clerk advised homeowners to stay in contact with her office. The clerk's office can help monitor the sale of the homes and alert the homeowner if they're owed a surplus.

Feds, State AGs Take Various Approaches In Efforts To Neutralize Deceptive Practices By Sleazy Bill Collectors, Zombie Debt Buyers

From a column in The Southeast Texas Record:

Medical researchers came up with a breakthrough in the 1980s in their quest to cure patients of HIV. They developed the Highly Active Antiretroviral Therapy, which non-scientists called a "drug cocktail."

Even though any single medicine was not powerful enough to cure people with HIV, it was discovered that the right cocktail of drugs could be highly effective.

Many U.S. attorneys general are working with each other and with the federal government to employ the same strategy to control and eventually eradicate the scourge that is unethical debt collectors, because just one strategy alone seems not to be enough.

West Virginia Attorney General Darrell McGraw saw how the settlement against a major debt collector in a class-action lawsuit would pay out a lousy ten bucks per victim. Exercising his rights to protect the citizens of West Virginia, McGraw then brought his own suit against the company for using false affidavits when obtaining default judgments against West Virginians and for not including necessary details when suing consumers.

Attorney General McGraw said:"Many consumers are frightened or unaware of their rights when they are sued and fail to respond to these groundless lawsuits, leaving them subject to judgments on debts that cannot be proved. Companies such as Midland rely upon this fear and typically drop their lawsuits if consumers know their rights."

Minnesota Attorney General Lori Swanson is prosecuting agencies who work with attorneys to scam consumers. Debt-settlement companies align themselves with lawyers so they can use official-looking letterhead to collect fees up-front for promising to help consumers with their overwhelming debts. Then they fail to deliver, leaving the consumers in even-deeper debt.

Attorney General Swanson said: "It's particularly galling. Here you're seeing people who have a special privilege -- the privilege to practice law -- abusing consumers who are down on their luck."

Illinois Attorney General Lisa Madigan is going after lawyers who specialize in requesting arrest warrants for consumers behind on their bills. One example is a 53-year-old woman who was stopped for a broken taillight. When the police ran her name, she was handcuffed in front of her kids and hauled away for a $2,200 debt that had turned into a default judgment.

The Wall Street Journalsurveyed just nine counties in the U.S. and found more than 5,000 such arrest warrants issued since 2010 for debt-related cases. Attorney General Madigan said: "We can no longer allow debt collectors to pervert the courts."

Texas Attorney General Greg Abbott has gone after multiple debt-collection companies, including one whose employees took the arrest-warrant threat to a whole new level. Their employees claimed to be associated with law-enforcement agencies and the IRS. They would insist that consumers pay their debts or risk facing arrest, prosecution, and imprisonment.

Massachusetts Attorney General Martha Coakley is onto the game some debt collectors play of threatening consumers with legal action while hiding the fact that the debt is "time-barred"; in other words, the debt has passed the statute of limitations for any legal action. Her amended regulations would require that consumers be informed of that fact.

Ohio Attorney General Mike DeWine has banded together with 18 other states to go after NCO Financial, a large debt-collector, for a whole range of violations, including extracting money from consumers for debts they did not owe, and charging excessive interest.

Ohio has a tradition of pursuing debt collectors. As Attorney General in 2010, Richard Cordray investigated two other debt-collection firms, and now he heads the Consumer Financial Protection Bureau. He therefore has first-hand knowledge of the games debt collectors play.

No doubt that is why Director Cordray has already proposed regulations that would involve on-site federal inspection of the top debt collectors representing 63 percent of collections in the U.S.

More bad news is in store for crooked debt collectors. Recently, state and federal officials gathered to announce the $25 billion mortgage-servicing settlement.

Attorney General Lisa Madigan used that event to reinforce the regulatory cocktail that's being assembled against the worst debt collectors: "Know that this is neither the beginning nor the end of our work to hold banks and other institutions accountable.... Today's settlement should serve as a warning for financial institutions: there are consequences for engaging in practices that jeopardize the stability of our communities and our economy."

Friday, March 30, 2012

A disbarred Annapolis lawyer was ordered Thursday to serve 18 months in the Anne Arundel County jail plus five years on probation for siphoning nearly $308,000 from a client.(1)

Jerold K. Nussbaum, 60, whom Karen Gunther hired to handle her mother's estate, stole most of it in 2005 and 2006, according to prosecutors and court records. He had pleaded guilty in January. "Mr. Nussbaum not only stole my money, but I've lost my home," Gunther, the heir, told Judge Paul A. Hackner, according to a recording of the court hearing. She said she had to move in with a cousin and still pay $6,000 a year in taxes on a house "I can't even live in" because she couldn't afford needed repairs.

Nussbaum, who practiced mostly tax and bankruptcy law and now works for a start-up company, was in financial trouble because of clients' bankruptcies, was going through a divorce and was using Gunther's funds to stay afloat, according to his attorney, Drew Cochran. He plans to repay the funds, Cochran said.

Nussbaum was disbarred in 2007 after using other clients' money between 2003 and 2005 for his expenses and seeking to cover it up when questioned by the Attorney Grievance Commission.

On March 22, 2012, James Boyd Douglas, Jr., who previously practiced law in Lee County, Alabama, pled guilty to engaging in a multimillion-dollar mortgage fraud scheme, announced the United States Attorney’s Office in the Middle District of Alabama.

Between January 2005 and September 23, 2011, Douglas handled numerous real estate closings and real estate refinancing transactions on behalf of his clients. As part of the real estate closings, Douglas received the proceeds of new mortgage loans.

Douglas was supposed to use the proceeds from new mortgage loans to repay the old mortgage loans on the properties that were being sold or refinanced. But instead of using that money to repay the old loans, Douglas embezzled more than $2,000,000 from his clients’ real estate closings over approximately six years.(1)

Florida Lawyer Gets Six Years For Looting $2.4M+ Of Entrusted Funds Belonging To Clients

In Fort Myers, Florida, Gulf Coast Business Review reports:

U.S. District Judge John Steele sentenced Fort Myers attorney Joseph Troiano, 63, [...] to six years in federal prison for mail and wire fraud. Steele also ordered Troiano to pay restitution to his victims totaling nearly $2.5 million. A jury convicted Troiano in November of six counts of wire fraud and one count of mail fraud for misusing client funds.

He used $2.4 million of client money to pay off loans and invest in real estate from 2005 to 2010 without his clients’ permission, according to a statement from U.S. Attorney Robert O’Neill.(1)

In an emergency petition, the Nevada State Bar is seeking to suspend the license of a politically active Las Vegas attorney, alleging he misappropriated tens of thousands of dollars in client funds and tried to cover up his actions.

The bar called attorney Barry Levinson a "substantial threat" to the public and said it wants the Nevada Supreme Court to issue a "swift and immediate suspension" of his license while the bar conducts formal disciplinary proceedings against him.

"In short, Levinson has repeatedly misappropriated funds and has compounded his misconduct by repeatedly lying to clients and the State Bar regarding his delay in disbursing funds to the appropriate parties," according to the bar in a 24-page complaint [...].

"Levinson's lies, combined with his failure to cooperate, constitute an obstruction to the State Bar's investigation, as does Levinson's failure to provide information requested." Disciplinary proceedings against Levinson could result in an additional suspension or disbarment.

Thursday, March 29, 2012

Suit Alleges Deutsche Bank Unauthorized To Conduct Foreclosures In Arkansas; All Related Sales, Title Transfers Could Be Void If Court Agrees

Law 360 reports:

Deutsche Bank National Trust Co. was hit Thursday with a proposed class action in Arkansas seeking a declaration that the bank wasn't authorized to operate in the state when it foreclosed on homes and transferred their titles in 2010.

Deutsche Bank, acting as trustee for Morgan Stanley ABS Capital I Inc. and other foreign and domestic trusts, conducted many foreclosures and foreclosure sales in Arkansas without obtaining the proper certificates from the secretary of state, invalidating all of the related title transfers, according to the complaint ....

State AG To Federal Appeals Court: 'MERS Has No Business Interfering In Oregon Non-Judicial Foreclosure Process!'

In Portland, Oregon, The Oregonian reports:

Oregon Attorney [General] John Kroger fired a shot across the mortgage industry's bow Tuesday, arguing for the first time that a national electronic loan registry can't trump state records laws.

If courts agree, it could route thousands of Oregon foreclosures through courtrooms, creating a drawn-out and much more costly process. That prospect might make banks more willing to bargain with at-risk homeowners, say homeowners' rights advocates.

Kroger weighed in on a case that won't by itself have the power to bind decisions in state or other federal courts. But it could influence similar cases, and/or the entire case could be transferred to the Oregon Supreme Court to decide on the issue of state law.

The state Department of Justice filed a brief in the 9th U.S. Circuit Court of Appeals, arguing that the Mortgage Electronic Registration Systems, or MERS, can't stand in for lenders when it comes to county records in what's called "a non-judicial foreclosure" -- one that does not go through court.

The electronic registry system was formed by the mortgage industry to track loans as they're bundled, bought and sold by investors. It's designed to avoid the cost and hassle of going through all the documentation normally required by state recording laws. The bundling of loans, known as securitization, wasn't envisioned by lawmakers when Oregon's recording law was written. But the Department of Justice said Tuesday that the industry's digital workaround didn't meet the standard of transparency the state law intended.

"Lenders using the MERS system have to follow Oregon law just like everyone else," Kroger said in a statement. "The Department of Justice will not tolerate lenders cutting corners in their rush to foreclose on Oregon homeowners."

The state's non-judicial foreclosure process requires beneficiary of a loan -- the entity that holds the note -- to be recorded after every transfer. Simply listing MERS as beneficiary on a multitude of deeds doesn't cut it, Kroger argued, if other entities really own the loans.

"Although the trust deed refers to MERS as the 'beneficiary,' courts need not accept that assertion at face value," the brief says. However the case is ultimately decided, it could have a chilling effect on out-of-court foreclosures.

"If the Hooker case is upheld, then it's just going to be another nail in the coffin for MERS, which may result in more banks simply going the judicial route rather than taking their chance in non-judicial foreclosure," said Phil Querin, a Portland real estate attorney.

The case in question revolves around a $260,000 loan taken out by Ivan and Katherine Hooker in 2005 that had traded hands twice before they fell into foreclosure in May 2010. In September of that year, the couple filed suit to block Bank of America from seizing their house. U.S. District Judge Owen Panner halted the foreclosure, saying the MERS system violated state recording law.(1)

On Tuesday, Kroger weighed in on the side of upholding Panner's decision. The Department of Justice is taking a side now because this case is the first to reach the U.S. Circuit Court of Appeals, said Keith Dubanevich, Kroger's chief of staff. "We felt that it's the perfect opportunity for the attorney general to express the legal view of the state of Oregon," he said.

Dubanevich said a decision in this case could have a controlling influence on others in the federal courts, which would normally look to state courts for guidance on issues of Oregon law.

It would take a state Supreme Court decision to definitively validate or invalidate the MERS system. Or the legislature could write a fix into state law. "This is not the final chapter by any means," Dubanevich said.

Pending Foreclosures Falling Through Cracks Lead To Rent-Free Living For Some Central Florida Homeowners

In Orlando, Florida, the Orlando Sentinel reports:

A few blocks from West Colonial Drive in Orlando is a weathered, split-level house that has been in foreclosure since 2007. The longtime owner has lived there for nearly five years without making a payment.

It's not the only Central Florida house that has idled in foreclosure longer than some kindergartners have been alive. Scattered across Metro Orlando, where 15 percent of all mortgaged homes have received a foreclosure notice in recent years, are more than 20 houses that have fallen through the cracks of local courts and mortgage companies for almost half a decade, according to records provided to the Orlando Sentinel by the real-estate-research company RealtyTrac Inc.

As these long-term foreclosures flounder between the homeowners and the banks that hold the mortgages, front-lawn weeds grow taller, lenders lose revenue, neighbors' property values decline, and courts get further backlogged. The homeowners live rent-free but end up with credit records so ruined that few landlords will risk renting to them should they be evicted from their properties.

The Fresno County district attorney's office is investigating U.S. Foreclosure Relief and some associated businesses, all tracing back to one suspect. Espi Chavez is used to taking ownership. She owns her own beauty salon in Selma, and a few apartments around town, but she no longer owns her own home. The modest house, a few blocks from Selma High School, sold at foreclosure auction last July. But Chavez didn't find out until someone from the bank told her she needed to move out.

For the previous nine months, Chavez had been writing checks to U.S. Foreclosure Relief, trying to get her mortgage loan modified.

She even received a letter saying the modification was approved a month before the foreclosure auction. She now believes it was a fake, manufactured by the owner of U.S. Foreclosure Relief, Vickie Fuentes.

***

Fresno County district attorney's office investigators served a search warrant at one of the business' former addresses, as well as at the home where Vickie Fuentes lived with her husband. They discovered at least 16 possible victims.

Action News tried to contact Fuentes, but no one answered the door and phone calls went unanswered. Espi Chavez doesn't expect to ever hear from her again, but she wants to see her... in police custody.

Wednesday, March 28, 2012

An Owings Mills man has been arrested on charges of forging loan modification documents that led five homes into foreclosure proceedings, state licensing officials said. Rodney Getlan, 45, has been charged by the Baltimore County State's Attorney with felony theft, operating without a license, mortgage fraud and other counts, according to a statement Friday from the Maryland Department of Labor, Licensing and Regulation.

For three years, from Jan. 2009 through Jan. 2012, Getlan forged documents that showed his victims had been approved for loan modifications by their mortgage lenders, according to the licensing department.

In the charges filed this week, nine homeowners, authorities say, were told by Getlan that they were approved for better mortgage interest rates. Getlan then stole their monthly payments —totaling more than $105,000 — and changed the contact information they had listed with their lenders, so the homeowners would not receive past due and foreclosure notices, according to the statement.

Two of the nine homeowners who used Getlan as a mortgage broker had their homes sold at foreclosure auction, the statement said, and three others have been notified that foreclosure is imminent.

Getlan was arrested [] on the 46 new criminal counts and is being held on $500,000 bail. In addition to the new counts, Getlan pleaded guilty in February to stealing from a victim of his mortgage fraud scheme. He was given a two-year suspended sentence. He also has an arraignment scheduled next week on different burglary and theft charges.

Martha Plata owned an interest in a property in Union City, New Jersey. LaSalle Bank obtained a final judgment for foreclosure and obtained an order for Plata’s property to be sold by the sheriff. LaSalle’s attorney sent a letter to Plata notifying her of the scheduled October 22, 2009 sheriff’s sale by both certified mail and regular mail.

The sheriff’s sale was adjourned to March 25, 2010. That morning, Plata filed a bankruptcy petition, resulting in the sale being further adjourned. The sale was subsequently adjourned a number of times until finally taking place on May 27, 2010. LaSalle Bank bid the property at the sale so there were no third parties involved in the sale.

Plata submitted a certification to the effect that at the time that she delivered a copy of her bankruptcy petition to the sheriff’s office, an employee of the sheriff’s office told her that the sale had already taken place on March 25, 2010. On May 3, 2010, Plata filed a motion in the trial court seeking to set aside the sale, which she believed had taken place on March 25, 2010.

Plata certified that when she called the sheriff’s office on June 17, 2010, she was informed that the sale had taken place on May 27, 2010. Plata claimed she was never notified that the sale would take place on May 27, 2010, as she was under the impression that the sale had already taken place on March 25, 2010.

LaSalle’s attorney provided the court with a copy of a letter informing Plata of a May 20, 2010 sheriff’s sale date and she testified that she provided Plata with a copy of a subsequent letter requesting postponement of the sale until May 27, 2010.

Plata claimed that she never received these letters. Court rules provide that when a court authorizes the public sale of property, notice must be sent to the owner at least ten days prior to the date set for the sale by registered or certified mail. As mentioned above, LaSalle’s attorney specified that she had done this, and although the certified letter had never been claimed, the regular mail letter had not been returned.

Subsequent notices of postponements of sheriff’s sales are not required by rule to be sent by certified or registered mail. Instead, in the case of adjournments, the rules and case law require that “some reasonable communication” be made informing the owner of the adjournment.

Although LaSalle’s attorney testified as to sending the letters specifying the adjournments, she apparently failed to furnish the court with a certification stating that (1) the mailing was correctly addressed; (2) proper postage was affixed; (3) the return address was correct; and (4) the mailing was deposited in the proper mail receptacle or at the post office.

The Appellate Division held that LaSalle’s failure to provide a certification as to all those items caused its notice to Plata to be defective. The court further noted that even had Plata seen the notice adjourning the sale to May 20, 2010, LaSalle did not show evidence that it had informed Plata of the further adjournment to May 27, 2010, when the actual sale took place.

The court ruled that LaSalle’s failure to prove that it had properly sent the notices caused the sale to be defective, and the court ordered the sale to be vacated.

The lesson here is that courts will strictly construe notice requirements for sheriff’s sales, so lenders have to be aware of this and be prepared to show how notices were delivered. One small, technical slip up could result in a sale being overturned.

It should be noted that the Appellate Division stated at the end of the opinion that because the property was sold to LaSalle, and there was no evidence that innocent third parties had any interest in the property, the court was proceeding with vacating the sale. The result might have been different had a third party purchased the property at the sheriff’s sale.(1)

(1) Had an innocent 3rd party purchased the property, the result probably should not have been any different. For a purchaser at a judicial foreclosure sale to avail itself of the protections accorded to a bona fide purchaser, said foreclosure sale purchaser arguably has the obligation to acquaint itself with the foreclosure file sitting at the local court house, and examine everything contained therein. Such a review of the file would reveal that the certification that was required to be submitted to the court was missing, thereby placing said purchaser on notice of the possible defect in the sale. Said purchaser such not enjoy the benefits of its own neglect.

Such a proposition has support in other jurisdictions. See, for example, Kordecki v. Rizzo, 106 Wis.2d 713, 317 NW 2d 479 (Wis. 1982), in which the court stated that had the party claiming bona fide purchaser status at a foreclosure sale examined the record prior to purchase, which he did not, the purchaser would have found the lis pendens recorded against the property being foreclosed. The lis pendens, in turn, would have led the purchaser to the county circuit court file on the foreclosure proceedings (the foreclosure court file number is typically noted on the lis pendens), and more specifically to the documents contained in said foreclosure file that, had they been examined, would have placed the purchaser on notice of defects in the process. Accordingly, the court ruled that the purchaser was not entitled to protection as a bona fide purchaser.

See also, Carnation Co. v. Midstates Marketers, Inc., 2 Kan. App. 2d 236, 577 P. 2d 827 (Kan. Ct. of App. 1978), supporting the proposition that an adequate title search of land requires the inspection/examination of a court file which is referred to in a recorded instrument affecting title to land.

The following facts are taken from a recent Hawaii foreclosure case decided by the U.S. Court of Appeals for the 9th Circuit:

A foreclosure sale of a home in Hawaii was scheduled and then postponed on four separate occasions.

For each of the first three postponements, the sale's postponement was made in accordance with Hawaii state law.

On a fourth occasion, the following narrative taken from the ruling describes what happened:

On September 23, 2005, the law firm attempted to postpone the sale yet again, a fourth and final time. The auction was scheduled to occur at noon at a flagpole located in front of Hale Halewai, a local community center.

The firm delegated the task to a legal secretary who had never before postponed a foreclosure sale. The secretary arrived ten or fifteen minutes before noon.

Rather than shouting out the postponement to all those present, the secretary asked several of the people present if they were interested in Debtor's property. Everyone she spoke to said they were not. She did not attempt to speak to those individuals who appeared to be there for another auction that was occurring at the same time, and she did not speak to everyone in the area. She did not tell those she spoke with that the auction was postponed to December 2, 2005.

The secretary stayed at the flagpole until approximately 12:25 PM, after the other auction had finished and the area was deserted. She left without ever announcing or posting the information that the sale of Debtor's property had been postponed.

The foreclosure sale took place on December 2. The successful — and only bid — was a credit bid made by the auctioneer on behalf of Lenders.

The homeowner subsequently sued the foreclosing parties for all kinds of things, one of which being the fact that the fourth sale was cancelled without any "public announcement" being made at the time the sale was cancelled.

On second appeal, to the 9th Circuit Court Court of Appeals, the court respectfully considered the ruling of the Bankruptcy Appelllate Panel and promptly reversed it, agreeing with the initial determination of Judge Faris, essentially saying that the legal secretary in fact screwed up by failing to make a "public announcement" of the cancellation at the sale, and accordingly, ruled that the foreclosure sale was to be voided.(1)

For the ruling, the thorough analysis of what constitutes a "pubic announcement" under Hawaii state law, as well as the other issues litigated in this case, see In re Kekauoha-Alisa (Kekauoha-Alisa v. Ameriquest Mortgage Company), No. 09-60019 (9th Cir. March 26, 2012).

Thanks to Deontos for the heads-up on the ruling.

(1) In the following excerpt, the appellate court emphasized the importance of strict compliance with (seemingly hypertechnical) procedures governing non-judicial foreclosure sales, such as the procedures in Hawaii:

That Hawaii law requires strict compliance with statutory foreclosure procedures is confirmed by the Hawaii Supreme Court's recent decision in Lee, a decision that was not available at the time the BAP issued its decision.

The Lee court, answering a question certified to it by a federal district court, held that a foreclosure sale conducted after the mortgagors had cured their default was not valid.

The court cited Silva for the proposition that the "foreclosure sale did not comply with the requirements of HRS section 667-5 and was, thus, invalid." Lee, 218 P.3d at 779. As in Silva, there was no discussion in Lee of the degree to which the violation of HRS § 667-5 prejudiced the mortgagor that would suggest that prejudicial impact is relevant under Hawaii's law.

While Lee involved the violation of a different requirement of HRS § 667-5 than is at issue here, the court's reasoning encompasses the facts of this case.

Finally, we note that a strict compliance requirement is not so out of step with the law of other jurisdictions that we have reason to second-guess our interpretation of Hawaii law.

The BAP is accurate in noting that the majority of states draw a distinction between procedural defects that are insignificant and those that are prejudicial enough to render a foreclosure sale void or voidable. See, e.g., Gilroy v. Ryberg, 667 N.W.2d 544, 553-54 (Neb. 2003) (describing the majority approach and collecting cases).

Tuesday, March 27, 2012

Court Confirms Fannie, Freddie Cheated Taxpayers Out Of Million$ In Deed Taxes On Foreclosures By Improper Claims Of Government Entity Tax Exemptions

In Detroit, Michigan, WXYZ-TV Channel 7 reports:

Oakland County is celebrating a major win over mortgage giants Fannie Mae and Freddie Mac. The county said U.S. District Court Judge Victoria Roberts ruled in favor of the county on Friday, saying the lenders were not exempt from the real estate transfer tax.

Oakland County Treasurer Andy Meisner explained that when a house is sold, the seller pays the county $1.10 for every $1,000 in value, and pays the state $7.50 for every $1,000 in value. Meisner said the lenders failed to pay those fees because they claimed they were tax-exempt as government entities.

“They’ve cheated,” Meisner told Action News [...]. “It’s cost us millions of dollars, and this is about taking one step toward recovering that and fighting back against the foreclosure crisis.”

A release from the county executive’s office estimates Oakland County taxpayers will recover as much as $1.5-million, but Meisner puts that number above $3-million. So far there is no word on if Fannie Mae or Freddie Mac will appeal the ruling. Action News attempted to reach both lenders for comment, but we have not heard back from either.

Sacramento Feds: Developer Concealed Existence Of Liens, Used Phony Sales Contracts, Recorded Forged Land Documents In Attempt To Score Financing

From the Office of the U.S. Attorney (Fresno, California):

United States Attorney Benjamin B. Wagner announced the arrest [] of Aruna Kumari Chopra, 63, of Modesto. A federal grand jury returned an indictment against her on March 15, 2012, charging her with two counts of mail fraud and two counts of aggravated identity theft. The indictment was unsealed following her arrest.

According to the indictment, in 2009, Chopra purchased property [...] in Modesto. She sought to finance the development of the property by trying to convince the City of Modesto to put into place a Communities Funding District that would issue bonds for infrastructure improvements.

She allegedly concealed from the City of Modesto that there were pre-existing liens on the property. She also allegedly provided the City of Modesto with fictitious contracts of potential sales of a fully developed property to support a higher appraisal of the property.

The indictment alleges that Chopra attempted to defraud other lenders, including the persons who sold her the property, by filing documents with the Stanislaus County Recorder’s Office that contained forged signatures. She is charged with aggravated identity theft for two instances when she allegedly forged the signature and used the seal of a notary public on a publicly filed document.

Another Homeowner/Victim Of Foreclosure Rocket Docket Scores Relief On Appeal; Rules On Good vs. Crappy Service Of Process Eludes Snoozing Trial Judge

The following facts are taken from a recent Florida appeals court ruling vacating a default judgment and setting aside a judgment of foreclosure (once again, we have a case that illustrates the need for a homeowner challenging a foreclosure in court to (1) understand that trial court judges are quite capable of dropping the ball on a pretty simple, basic issue of law, and (2) be ready, willing, and able to challenge a trial judge's ruling in an appeals court when the situation calls for it, as the homeowner did in this case):

Bank begins foreclosure proceedings on homeowner, one Mr. Baker.

Homeowner Baker happens to be in Europe on a business trip and, while he was away, he allowed the out-of-town parents of a friend, Mr. and Mrs. Vadim Saitgareev, stay at his home, while the the Saitgareevs met with medical providers in Sarasota.

Homeowner Baker's friend arranged the entire stay. Baker was not present at the home at any time during the Saitgareevs' visit.

The Saitgareevs did not talk to homeowner Baker to arrange the visit, nor did they talk to him during their stay at his home.

While Homeowner Baker was in Europe on business, a process server dropped by to serve the lawsuit papers on him and, instead, met houseguest Mr. Saitgareev.

Houseguest Mr. Saitgareev refused to accept service on behalf of homeowner Baker. Houseguest Saitgareev did not open the door for the process server, but said that homeowner Baker was not at home. Saitgareev told the process server that he would not see homeowner Baker and that Mr. Baker was a friend of their daughter.

According to houseguest Saitgareev, the process server kept yelling at him and his wife through the door. Saitgareev told the man that he would not accept any paper for homeowner Baker because he did not expect to see him before he returned home.

The process server proceeded to leave the lawsuit papers at the front door.

Homeowner Baker had departed for Europe three days before the process server's visit and returned four days afterwards.

The foreclosing lender subsequently obtained a default judgment and a judgment of foreclosure.

Subsequently, homeowner Baker filed a motion to quash service of process, vacate default, and set aside the final judgment of foreclosure.

At the hearing, the foreclosing lender's submissions into evidence was limited to the process server's return of service.

Homeowner Baker submitted what the appellate court later found to be clear and convincing evidence in the form of affidavits from himself and Mr. Saitgareev,(1) as well as giving testimony in court attesting to the foregoing facts. Baker's testimony was substantially the same as his affidavit.

Attached to homeowner Baker's affidavit were copies of pages from his passport displaying immigration stamps marking his entry and exit from Europe on the dates he claimed. He also stated in his affidavit that at no time between these dates did he leave Europe.

The Bank failed to provide any further evidence or call any witness to refute the clear and convincing evidence provided by homeowner Baker.

homeowner Baker provided clear and convincing evidence that he was not at the home on the day of the process server's visit, and that the Saitgareevs were merely "short term houseguests" who were not actually residing on the premises, and

the foreclosing lender failed to meet its burden to refute the clear and convincing evidence provided by Baker,

the foreclosing lender had failed to establish that the service of process in this case was anything other than crappy. Accordingly, the appeals court reversed the ruling of Sarasota County Circuit Court Judge Charles E. Roberts, and booted the case back to him with instructions to grant the motion to quash service of process, vacate the default, and set aside the final judgment of foreclosure.(2)

(1) According to the appeals court ruling, Mr. Saitgareev stated in his affidavit that:

He was born in Russia and that English is not his first language.

His permanent residence is in Massachusetts and he resides at no other place (Mr. Saitgareev also attached a photocopy of his current driver's license to substantiate his Massachusetts address).

On the date of service in this matter, he was temporarily away from home as a houseguest of Mr. Baker.

Mr. Baker had permitted him and his wife to use his home while he was away in Europe because they needed a place to stay for a few days while attending medical treatment in Sarasota.

Mr. Baker was not present at the home at any time during their visit.

Their daughter is a friend of Mr. Baker and she arranged the visit. He and his wife did not talk to him to arrange the visit, nor did they talk to him during their stay at his home.

(2) The Florida appeals court provided the following analysis in explaining the obligations of the parties when establishing whether service of process is good or crappy (bold text is my highlight, not in the original text):

There is no issue whether Mr. Baker was personally served. The question then narrows to whether Mr. Saitgareev was "residing" at Mr. Baker's home when the process server left the papers at the door.

This is so because the parties do not dispute any of the remaining elements of this statute, i.e., the place at which the process server left the summons and complaint was Mr. Baker's "usual place of abode," Mr. Saitgareev was fifteen years of age or older, and the process server did inform the person there of the contents of the papers he left at the front door.

At the evidentiary hearing on Mr. Baker's emergency motion to quash service of process, vacate default, and set aside the final judgment of foreclosure, the Bank had the initial burden to sustain the validity of service because it was the party invoking the jurisdiction of the court. See Bank of Am., N.A. v. Bornstein, 39 So.3d 500 (Fla. 4th DCA 2010).

The Bank carried its initial burden in this case because it presented as evidence at the hearing the return of service, which Mr. Baker admits is regular on its face. "A process server's return which is regular on its face is presumed valid absent clear and convincing evidence to the contrary." Bennett v. Christiana Bank & Trust Co., 50 So.3d 43, 45 (Fla. 3d DCA 2010).

The burden then shifted to Mr. Baker to make a prima facie showing by clear and convincing evidence that the substituted service was defective. This he did by submitting not only the two affidavits, which are competent evidence on such issue, see Viking Superior Corp. v. W.T. Grant Co., 212 So.2d 331 (Fla. 1st DCA 1968), but also by testifying in person.

He testified that Mr. Saitgareev was staying at his home while he himself was away on business, that Mr. Saitgareev was but a temporary houseguest who did not stay more than seven days—evidenced by the fact that the Saitgareevs were not there when he left nor when he returned—and that his home was the "usual place of abode" to no one but himself.

Mr. Saitgareev's affidavit established that his own "usual place of abode" was in Massachusetts, and he attached a photocopy of his current driver's license to substantiate his Massachusetts address. Thus, his temporary stay in Mr. Baker's home for a few days to receive medical treatment in Sarasota merely made him a short-term houseguest.

A short-term houseguest is not a person residing in the usual place of abode of the person to be served. Couts v. Md. Cas. Co., 306 So.2d 594 (Fla. 2d DCA 1975) (holding that a stay of a few days is insufficient to qualify that visitor to receive substituted service); Gamboa v. Jones, 455 So.2d 613 (Fla. 3d DCA 1984) (holding the same for a ten-day visitor).

Having had its prima facie showing of regular substituted service rebutted, it was incumbent upon the Bank to provide competing evidence to overcome Mr. Baker's showing of substituted service upon a mere short-term houseguest. This burden-shifting is illustrated, in the analogous context of personal jurisdiction via the long-arm statute, in Hilltopper Holding Corp. v. Estate of Cutchin ex rel. Engle, 955 So.2d 598 (Fla. 2d DCA 2007).

In Hilltopper, the plaintiff met its initial burden to establish personal jurisdiction over the defendants, but the defendants fully disputed, via sworn affidavits only, the jurisdictional basis alleged by the plaintiff. This shifted the burden back to the plaintiff to prove by affidavit or other sworn proof that a basis for personal jurisdiction existed. The plaintiff failed in this by offering no other sworn facts to establish personal jurisdiction over the defendants and refute their evidence that they were not subject to personal jurisdiction via the long-arm statute. Id. at 603. Accordingly, the trial court's order finding that personal jurisdiction over the defendants had been established was reversed.

Like the plaintiff in Hilltopper, the Bank, as plaintiff, failed to refute Mr. Baker's factual evidence that Mr. Saitgareev was not residing in his home at the time service was attempted. The Bank presented no further evidence, such as an affidavit or testimony that Mr. Saitgareev's stay was of a longer duration so as to qualify him as a person residing at Mr. Baker's usual place of abode. Cf. Magazine v. Bedoya, 475 So.2d 1035 (Fla. 3d DCA 1985) (holding that mother-in-law's six-week visit qualified her as a person residing in the defendant's usual place of abode); Sangmeister v. McElnea, 278 So.2d 675 (Fla. 3d DCA 1973) (holding that a visit of four months establishes that person as a resident who may properly accept substituted service).

Monday, March 26, 2012

Steven J. Baum PC, the largest foreclosure law firm in New York until it shut down last year, reached a $4 million settlement with the state over abuses in its legal work.

Part of the money paid by the firm, Pillar Processing LLC, Steven Baum himself and managing partner Brian Kumiega will be used to help homeowners facing foreclosure or victims of predatory lending, New York State Attorney General Eric Schneiderman said today in a statement. Baum formed Pillar in 2007 to process foreclosure documents.

***

In October, the firm, based in Amherst, New York, just north of Buffalo, reached a $2 million agreement related to its foreclosure practices with Manhattan U.S. Attorney Preet Bharara. After that settlement was announced, Fannie Mae and Freddie Mac, the mortgage-finance companies under U.S. conservatorship, dropped Baum from their lists of law firms eligible to handle foreclosures. The firm then said it would close.

From the Department of the U.S Treasury, Office of the Comptroller of the Currency:

The Office of the Comptroller of the Currency (OCC) has been notified that a group using the names “855LAW5559” and “National Legal Help” has misrepresented that the OCC has directed their organization to send foreclosure grant review correspondence to banking consumers.

The OCC has no knowledge of or affiliation with the group responsible for sending the letters and did not direct it to send any letters to consumers.

Letters were apparently sent to homeowners facing mortgage foreclosure. The letters claim the recipient’s lender is being investigated for wrongdoing by banking regulators. The letters also state that the recipient’s mortgage loan is being reviewed for foreclosure fraud.

The letters inform the recipient of his or her approved eligibility to receive $10,000 in grant assistance and ask the homeowner to use the services of National Legal Help by mailing the organization a payment of $10,000 by a specific due date.

Based upon the OCC’s review of information and National Legal Help’s Web site (www.nationallegalhelp.com), the program does not appear to be legitimate and instead is likely an “up-front-fee scam.”

The offers of help arrive at a particularly vulnerable time for troubled homeowners, promising legal tactics that can fend off foreclosures or slash mortgage balances and rates. But the so-called mass joinder lawsuits against lenders often are only the latest foreclosure-rescue frauds designed to extract payments from financially strapped borrowers, the Federal Trade Commission warns.

"The firms involved in this scam promise relief but generally don't deliver," the FTC said in a consumer alert posted on its website Thursday. "In fact, many of the firms fail to use qualified attorneys or pursue homeowners' cases, and often leave their clients in worse financial shape than before."

The FTC said that at its request a judge this week shut down one of the alleged scams, a Santa Ana mortgage-relief operation headed by Sameer "Sammy" Lakhany, 31, of Chino Hills. The operation — five companies and three websites controlled by Lakhany — took in more than $1 million from hundreds of consumers, according to an FTC lawsuit filed in U.S. District Court in Santa Ana. Gerald Werkman, an Irvine attorney representing Lakhany, declined to comment, saying his firm had "just been retained in this matter."

The FTC suit identified Lakhany's companies as Credit Shop, Fidelity Legal, Titanium Realty, Precision Law Center Inc. and Precision Law Center LLC.(1) His websites — HouseHoldRelief.org, FreeFedLoanMod.org and MyHomeSupport.org — were shut down on orders from U.S. District Judge Cormac J. Carney, who issued a temporary restraining order against the companies and froze their assets.

The websites, featuring republished news stories describing the mortgage industry's legal troubles, suggested that the operation was a nonprofit effort to help right wrongs suffered by borrowers, said FTC consumer protection attorney Mark L. Glassman.

"They wrapped themselves in the cloak of good deeds that others are actually doing on behalf of consumers," Glassman said.

The FTC lawsuit is the second high-profile legal attack in California on lawsuits in which numerous plaintiffs team up to sue mortgage companies. State Atty. Gen. Kamala D. Harris in August sued several law firms and individual attorneys who allegedly operated a nationwide scam by deceptively marketing mass joinder suits. That litigation, including counterclaims against the state by the defendants, is pending, Harris spokesman Shum Preston said.

Mass-joinder lawsuits are similar to class-action suits in pitting many plaintiffs against a common defendant. But whereas class actions allege that all victims were harmed in the same way, the allegations and damages in mass joinder suits vary from plaintiff to plaintiff.

The FTC's lawsuit, its first targeting mass-joinder cases, said Lakhany's operation charged homeowners $6,000 to $10,000 each to join lawsuits against lenders. The pressure created by the suits was supposed to result in pretrial settlements that could stop foreclosures or produce major concessions, such as cutting the homeowners' interest rate in half or reducing their principal to 70% of the home's value. The lawsuits were filed but allowed to languish or dismissed, the FTC said.

In another alleged scam, the operation charged homeowners $795 to $1,595 for a "forensic loan audit" that borrowers were told would find violations by a lender at least 90% of the time, the FTC said.

The violations would supposedly give a homeowner leverage to get his or her mortgage modified. If the audit did not turn up any violations, the homeowner got the promise of a 70% refund while still getting a mortgage modification, the FTC said.

The companies also falsely described themselves as nonprofit, free, accredited or as housing counselors certified by the federal Housing and Urban Development Department, the FTC said.

(1) According to the FTC press release, to convince consumers that they should hire Precision Law Center, telemarketers working for the alleged racket followed up by mailing material to them promising that the mass joinder suit would result in:

An Oxnard woman and a Los Angeles man were charged with four counts of grand theft on allegations they collected thousands of dollars in fees on promises to reduce a woman's mortgage loan and save her home from foreclosure, prosecutors said.

Gloria Becerra, of Oxnard, and Hector Menendez, of Los Angeles, also were charged with 11 counts of foreclosure consultant fraud and one count of attempted grand theft, according to prosecutor Dominic Kardum.

Both were arrested Tuesday and remain free on $100,000 bail each, jail records show. Becerra, 46, and Menendez, 55, ran a fraudulent home modification and foreclosure rescue program, Kardum said in a news release. They used the business names of Sunset Beach Management, Financial Wellness for Homeowners LA and California Sky Premiers, Kardum said.

The victim received no services from the defendants. She lost thousands of dollars and her home to foreclosure, according to Kardum. Becerra and Menendez are due in court for a hearing April 16, court records show. If convicted, both could get up to 12 years and eight months in jail, Kardum said.

People who think they might have been deceived by Becerra and Menendez may call the Real Estate Fraud Unit at 662-1750.

Rene Alvarez and Mariano Ortega, the co-owners of M & R Contemporary Solutions, a Campbell foreclosure consulting firm, pled guilty and no contest Monday to theft and foreclosure fraud charges. The charges related to a scheme that, over a year, bilked about 400 mainly Hispanic homeowners out of close to $2 million.

A total of 10 victims were from South County: seven from Gilroy, two from Morgan Hill and one from San Martin, according to Mike Fitzsimmons, Deputy District Attorney for the real estate fraud unit.

Victims, who were in various stages of the foreclosure process, were told that M & R Contemporary Solutions would save their homes from foreclosure by facilitating the purchase of their existing lender's loan by a third party at a discounted price.

Ostensibly, the homeowners would then be offered a new reduced principal loan that would have significantly lower monthly payments. Homeowners paid from $3,000 to $10,000 each to M & R depending on how far along they were in the foreclosure process. The collection of up front fees from homeowners in foreclosure is a felony under California law regulating the conduct of foreclosure consultants.

In many instances, victims paid $10,000 even though they had already lost title to their homes via foreclosure. No M & R client ever received a new loan.

***

Sentencing for Alvarez and Ortega is scheduled for May 21 in Santa Clara County Superior Court, Department 30. They will receive a five year sentence of jail and mandatory supervision under the new California realignment law. A third defendant in the case, Cydney Sanchez, is still pending trial in the matter.

Investigators have seized $257,000 from M & R's bank accounts which may be applied toward restitution. Victims of M & R who seek information on the sentencing or restitution should contact the Santa Clara County District Attorney's Office Real Estate Fraud Unit at (408) 792-2879.

The San Diego City Attorney's Office announced [] that will spend a $57,000 state grant to hire a part-time investigator to look into allegations of mortgage and foreclosure fraud.

The investigator will focus on loan modification and foreclosure consultant businesses that take advance fees in violation of state law.

"Violators must be stopped before they take large amounts of money from victims or waste critical months of homeowners' time with false promises and representations," City Attorney Jan Goldsmith said. "By proactively pursuing these bad actors at the beginning of their business dealings with misdemeanor prosecution, we can save many potential victims a lot of heartache."

Sunday, March 25, 2012

M.D. Sass Investors Services Inc., a closely held manager of more than $5 billion, participated in an auction of New Jersey tax liens that has come under the scrutiny of U.S. antitrust investigators probing rigged sales.

A representative of M.D. Sass, whose tax-lien funds have as much as $110 million in assets, was among seven bidders vying for liens in the New Jersey borough of Newfield, according to records of a March 5, 2007, auction. Three people associated with the seven bidders pleaded guilty to antitrust charges and are cooperating with prosecutors.(1) The Justice Department subpoenaed records of the auction on Feb. 15. M.D. Sass hasn’t been accused of wrongdoing.

The U.S. records request comes amid a widening probe into rigged liens sales in New Jersey. Since August, five men have pleaded guilty to conspiracy charges. The guilty pleas were to an overall conspiracy and not to the particular auction in Newfield, 35 miles south of Philadelphia.

Units of Royal Bank America, which operates branches in Pennsylvania and New Jersey, co-owned lien-buying firms with one of the men admitting guilt. The units are subjects of the probe, regulatory filings show. Royal Bank America is a unit of Royal Bancshares of Pennsylvania Inc.

Justice Department prosecutors want “all tax sale bidder information,” according to a copy of the subpoena disclosed by Newfield in response to a request under the state’s public records law. That includes “the name and address of each person who attended the relevant tax lien sale,” according to the subpoena.

“M.D. Sass companies have no comment on any activity or investigation that may be under way at the Department of Justice,” Mark Rotert, a lawyer for the New York-based firm, said in an e-mail.

Separately, M.D. Sass was found liable last year in a Chicago trial over civil racketeering claims involving tax liens.

***

New Jersey municipalities seeking revenue sell about $100 million a year in local tax debt on commercial and residential property to investors, said Vincent Belluscio, executive director of the Tax Collectors and Treasurers Association of New Jersey. Firms that buy liens at auctions pay the tax liability in full and then seek to collect from the property owner. They may earn as much as 30 percent on their investment, Belluscio said in a phone interview. In addition to interest of as much as 18 percent on delinquent taxes, the firms may add penalties of as much as 12 percent, he said.

Bidders on the liens are supposed to compete fairly for the right to buy them and collect taxes on property. Buyers, who seek the return of their principal investment and interest, begin bidding at 18 percent interest and then lower that rate with each bid.

Each of the 59 liens sold in the Newfield auction went for 18 percent, according to borough records. That suggests the seven participants didn’t bid against one another, Belluscio said in a phone interview.

“It makes it a little suspicious,” he said. “It’s very strange if you have that many lines up for sale, and they’re all going up for 18 percent.”

M.D. Sass bought four liens, including the two largest. Other firms purchased as many as 11, according to records. Daniel Lebar, a lawyer and tax lien investor who bought three, said participants at the auction chose not to compete because there were many liens available for the few bidders who showed up.

“The sense was the list is long, we all know each other, there is no need to kill each other, so we’ll just bid round- robin,” Lebar said in a phone interview. “It was really just spur-of-the-moment,” he said. “There was no conspiracy.”

Lebar said lien buyers sometimes followed that practice at other New Jersey auctions including some in Camden County. “It’s a niche business,” said Lebar, 55, who followed his father into the business. “We have camaraderie among each other. If we get a sense that there’s enough for everybody, we’ll bid round-robin.”

Harry First, who teaches antitrust law at New York University School of Law, said such spur-of-the-moment decisions may violate antitrust law. “If you agree beforehand, there’s no requirement how beforehand it has to be,” First said in a phone interview. “If people show up and agree to allocate the bids, and there’s no bidding, they’ve done it.”

The Newfield auction attracted individuals or firms associated with individuals who pleaded guilty to an antitrust conspiracy charge in federal court in Newark, New Jersey. The three pleading guilty were Robert Stein, David Farber and William Collins. Stein’s lawyer, Paul Zoubek, and Farber’s attorney, Michael Mustokoff, didn’t return calls. Collins’ lawyer, Jack Wenik, declined to comment.

***

M.D. Sass has been buying tax liens since 1993, according to testimony in October at the unrelated civil racketeering trial in federal court in Chicago. The firm has invested hundreds of millions of dollars buying liens in states including New Jersey, Kentucky and Massachusetts, Kirk Allison, a vice president at M.D. Sass Investors Services, testified at the trial.

***

A federal court jury found in favor of two lien-buying firms that claimed that M.D. Sass and other companies secretly worked together to buy and trade liens, according to court records. The damages awarded will exceed $10 million, said Jonathan Quinn, a lawyer at Reed Smith who represented the plaintiffs.

Rotert, the lawyer for M.D. Sass at the trial, said the firm plans to appeal. “We believe the verdicts are incorrect as to the facts and we think certain errors of law took place before and during the trial,” Rotert said.

The Chicago case is Phoenix Bond & Indemnity Co. v. Bridge, 05-cv-04095, U.S. District Court, Northern District of Illinois (Chicago).

(1) Another example of squealing schemers abandoning a 'sinking conspiratorial ship', winning the race to the prosecutor's office and seeking to take down fellow co-conspirators by 'throwing them under the bus' to score a better break on a plea deal. Vrooooom!!! As noted by one learned Federal judge:

"When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed." United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring) (referring to the not-uncommon 'race to the prosecutor's office' that breaks out among participants in an 'about-to-fall-apart' criminal conspiracy).

CBC News: Betrayal of Trust (A CBC investigation reveals how lawyers across Canada have misappropriated and mishandled clients money, to the tune of tens of millions of dollars, or sometimes even charging vulnerable people top dollar for shoddy services)

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